Other risks factor into Liquidity Risk and must be taken into account

Bankers and examiners must understand and assess how a bank’s exposure to other risks may affect its liquidity. The OCC defines and assesses eight categories of risk. In addition to liquidity, these risk types include credit, interest rate, price, operational, compliance, strategic, and reputation. These categories are not mutually exclusive—any product or service may expose a bank to multiple risks—and a real or perceived problem in any area can erode a bank’s liquidity position or affect its funding costs, thereby increasing its liquidity risk. If a bank does not properly manage these exposures, the risks eventually undermine the institution’s liquidity position.